What HR Managers Can Learn from DIFC's Workplace Savings Programme

When making decisions regarding the new End of Service Benefit (EOSB) saving scheme on the Mainland, HR managers and business leaders should consider the experience and lessons learnt from the DIFC.

Why? Simple – the DIFC introduced a workplace savings programme already over five years ago, replacing the old EOSB gratuity with a new savings-based system.

The DIFC system works slightly different to the new mainland system, however, there are also many common features: (a) It is a saving scheme; (b) employers make contributions (5.83% resp. 8.33% on top of employees' basic salary); and (c) employees can choose a fund where the contributions are invested.

So: What does the DIFC experience show? Let’s have a closer look!

Brief snapshot of the DIFC schemes

The DIFC Employee Workplace Savings Plan – DEWS – was introduced early 2020 on a mandatory basis. Since then, the scheme has crossed USD 1 billion in assets under management and now covers more than 74,000 employees. Last year, DEWS was joined by a second scheme – GO SAVER – giving DIFC companies a choice between two plans. By all measures the scheme has been very successful so far, and no doubt the Mainland authorities have been watching its development very closely.

For today’s article let’s focus on the performance of DEWS as we have over 5 years of data available. In particular, in order to illustrate some of our “lessons learnt”, let us focus on three funds from the DEWS panel (which consists of more than ten funds – for further details please see here.

The funds we are examining in more detail are:

• Mercer Low Growth Fund (more details here)

• Mercer Low/Moderate Growth Fund (which is the default fund of the DEWS scheme. More details here)

• Mercer High Growth Fund (More details here)

Lets start: Which fund has performed the best?

Comparing different Funds over a 5y Horizon

Let’s start by looking at the raw performance data. The table below shows the yearly investment gain (or loss) for each of the three funds:

Figure 1: Table of yearly performance of selected DEWS funds

 Figure 2: Graphic of yearly performance of selected DEWS funds

Conclusion: The performance difference is quite striking. The lower risk funds have gained less in the good years – but lost less in the bad year of 2022.

Vice versa, the higher risk funds have gained more in the good years, but lost more in the bad year. In short – the three funds show clearly that the different funds have different levels of risk, different volatility, and different investment performance.

What lessons can we learn?

Lesson 1; Every fund is a trade-off

As mentioned, the chosen funds allow for a great illustration how different types of funds work out in practice:

• High Growth: +41.6% over five years — but a brutal −12.6% in 2022.

• Moderate: +19.9% — with a painful −9.9% in 2022.

• Low Growth: +10.8% — no annual loss worse than −1.1%.

There's no single "best" fund — only the right fund for a specific person in a specific situation.

As we have seen, funds have different levels of risk. And this translates into different levels of volatility, and different levels of potential investment gains.

Lesson learnt: You cannot have it all - it's always: the higher the risk, the higher the potential return. The lower the risk, the lower the return.

Lesson 2: Investment choice is the whole game

Under DEWS, employees choose how their money is invested. That's a profound shift from the old gratuity regime, where employees had zero choice and zero visibility.

Different categories of employees have different needs:

• A 27-year-old with a 30-year career ahead of him can live with higher volatility — as he benefits from it through compounding of higher returns. If the fund goes down in a given year – the rebound next year or the year after will more than make up for a temporary hiccup.

• A 60-year-old two years from retirement cannot afford a 2022-style drawdown. It's natural to be much more prudent in this life stage, and to reduce risk.

• A conservative saver who panics and loses his sleep at the first negative return may have a personal preference for a fund that has less volatility (and less drama) and is happy to forego a potential profit for a life less stressful.

Force all three people into one single fund and you systematically disappoint at least two of them. In short: One size does not fit all. A broad choice of funds matters!

Lesson 3: "Capital Guarantee" sounds safe — but it comes at a cost

This is the lesson HR managers most often underestimate.

The mainland scheme's main fund is a Capital Guarantee fund, as described in Cabinet resolution 96/2023, and managers including FAB, Daman, National Bonds, and Lunate's Ghaf Benefits have launched funds accordingly.

Capital guarantee funds have their place — particularly for employees near retirement or planning to leave the UAE.

But the DEWS Low Growth fund exposes the hidden cost: Over 2021–2025, the fund in question returned roughly 2.1% per year, while UAE inflation averaged 2.5–3%. In real terms, the "safe" fund has actually lost value (in terms of purchasing power).

Over the same period, the Moderate fund delivered roughly 4× that return, and the High Growth fund roughly 13× — including the 2022 crash. Capital guarantee isn't really "safety"; it's a trade-off in which the employee forfeits almost all of the upside in exchange for protection against a downside they may not need to fear.

Lesson learnt - capital guarnatee funds carry a real cost.

Lesson 4: Three employees, three choices, three outcomes

Imagine three colleagues at the same DIFC firm: Yahia (60 years old), Mohammed (50 years old) and Aisha (30 years old). They all earn the same - $60,000 per year. The employer makes a mandatory contribution of 8.33% (= $4998 per year) of the employee’s salary into the fund chosen by each – Yahia chooses the Low Growth fund as he is nearing retirement; Aisha chooses the high growth fund as she is at the beginning of her career, and Mohammed chooses something in the middle.

How much will they save over time? Here is the result:

 Figure 3: Table of 5-year result of different EOSB saving plans

  Figure 4: Graph of 5-year result of different EOSB saving plans

All three made the right call for their circumstances. We note that Aisha finished 20% ahead of Yahia — a substantial extra $5k savings purely from the investment performance of the chosen fund,

Lesson learnt – different fund choices will result in very different outcomes. Playing your cards right, will make a meaningful difference.

Lesson 5 — Don’t panic!

Let us continue looking at Aisha’s investment performance.

What would have happened, if in 2022 she switched to Low Growth at the bottom of the market?

In this case she would have locked in the −12.6% loss and missed the +11.9%, +8.8%, and +16.9% recovery years. She would have ended up with several thousand dollars less, and would finish the 5 year period with the worst possible result. Not panicking in a downturn is key.

Lesson learnt -  Investor behaviour has a massive impact on the overall investment result.

The bottom line: What this means for mainland HR managers

Build financial literacy. Choice without understanding is just a different kind of harm. Practical steps:

• Offer your workforce Financial Literacy courses covering the basics of investing, and in particular how the new EOSB saving schemes work. (Check the GratuityAdviser eLearning offering!)

• Run annual onboarding and refresher sessions tied to your plan's specific funds

• Provide risk-profiling tools & Calculators (Check the Free calculators on the GratuityAdviser website)

• Make factsheets accessible in plain language

• Be explicit about what "capital guarantee" really means, and what it costs in foregone long-term returns.

2. Investment choice is a key criterion when selecting a fund manager. The conversation shouldn't just be about fees. Rather, you should ask:

• How many funds are on offer? Are there more funds in the pipeline? 

• Do you provide conventional and Shari'ah-compliant options at different risk levels?

• Is the risk spread genuinely wide — from capital-protected through to equity-heavy?

• What does employee-facing education and communication look like?

• What is the funds' track record, compared to benchmarks?

Conclusion

The DEWS experience gives mainland HR managers and Business Leaders a five-year head start, and the data points in one unambiguous direction:

Investment choice isn't a "nice-to-have". It gives employees the best possible choice.

The mainland scheme is voluntary — for now. But the direction of travel is clear, and employers who treat EOSB as a genuine retirement-savings benefit rather than a compliance checkbox will win on talent attraction, retention, and trust in the years ahead.

Five years of DEWS data has effectively taught us some useful lessons. The only question left is whether mainland HR teams choose to learn from that experience.